Operations Profile - BodyShop Business

Operations Profile

That was then …

In the year 1906, Baltimore County Commissioners
came up with a sure-fire way to stop speeders: They gave police
officer Noah Walker permission to shoot at cars when drivers violated
the speed limit.

"Slow down, or I’ll shoot!"

When Walker fired at Yates Pennington’s car,
Pennington filed charges against him – but the commissioners didn’t
see the problem. They cleared Walker of all charges and told him
to keep up the good work.

While shooting at speeders seemed like a good
idea for a while, authorities later decided police officers should
stop firing and start writing – tickets, that is. Someone, somewhere
probably reasoned: Why should Baltimore body shops profit from
repairing all those nicked-up vehicles when the city could profit
from ticket fines instead.

This is now …

These days, while our city police officers
and state troopers are busy writing tickets, shops, too, are busy
writing – estimates.

And write estimates shops did in 1996. On
average, our survey respondents wrote 21 estimates per week (up
from last year’s 18.9), and they closed the deal more often in
’96, too; on average, respondents converted 61.9 percent of estimates
into actual jobs (up from last year’s 57.3 percent) – a bit of
an accomplishment considering that consumers are harder to please
and more mistrusting than ever.

In a recent survey conducted by NAPA, consumers
rated technicians almost equally with lawyers and only slightly
higher than politicians regarding trust. Consumers also consider
car repair a major hassle – in fact, those surveyed said taking
their cars to the shop is a bigger hassle than filing their taxes.

For reasons such as this, shop owners tried
in 1996 – and are still trying – to make the repair process more
understandable and less daunting. One way of doing this: Shop
owners are taking more time with their estimates and final bills
so customers understand how they’re being charged (hours, dollars
or units), what repairs are being made and how much the repairs
will cost. Many shop owners also have customers authorize the
repairs by initialing the work order. This process eliminates
confusion as to how the final bill was determined, helps avoid
the perception of fraud and also helps foster trust.

This added effort seems to be paying off.
On average, shops performed 16.7 jobs per week in 1996, up substantially
from last year’s 11.9 (only 11.8 percent of our respondents experienced
a decrease in the average number of jobs performed weekly). The
average ticket price continues to rise as well: On average, it
was $1,551.27 in 1996, a 16.2 percent increase of last year’s
average of $1,335.34. (It should be noted that this increase doesn’t
necessarily translate into more profit for owners because, each
year, the cost of replacement parts, components and materials
also increases.)

Before overhead expenses, the average gross
profit margin on parts and labor increased, too – up to 26.5 percent
on parts from last year’s 24.9 percent and up to 51.3 percent
on labor from last year’s 42.9 percent. The average gross profit
margin was 33.7 percent in 1996, while the average net profit
margin was 15.6 percent.

When performing repairs, about 43.5 percent
of labor hours is spent on body work, 31.5 percent on painting,
15.3 percent on measuring and straightening, and 9.7 percent on
mechanical repairs. To make repairs, respondents replace with
new parts 49.7 percent of the time, repair damaged parts 24.9
percent of the time, replace with used (salvage) parts 13.4 percent
of the time and repair with aftermarket parts 12 percent of the
time.

Respondents who prefer used parts to aftermarket
parts cited these reasons:

  • better fit;
  • quality;
  • durability;
  • accessibility;
  • no choice – "I don’t like used parts," said one
    shop owner, "but I’m forced by insurance companies [to use
    them]."

Respondents who prefer aftermarket parts to used parts cited these
reasons:

  • easier and faster to obtain;
  • less damage, less rust, less preparation time;
  • price;
  • misrepresentation by salvage yards about the condition of
    used parts;

  • better fit – "quality and fit are getting much better,"
    said one respondent.

Shops had more jobs in 1996, and they also had a bit more room
in which to perform them. On average, respondents had 13.4 bays
(up from last year’s 12.2) and 5,431 square feet of production
space (which doesn’t include office, showroom, parking lot, etc.)

When asked if they increased their production areas in the past
year, 83.3 percent of respondents had not, while 16.7 had. Breaking
that down by sales volume, 94.4 percent of respondents in the
up-to-$124,999-a-year category

didn’t increase production space – the most of any group – while
29.6 percent of respondents in the $125,000-$249,000-a-year category
did increase production areas – the most of any group.

Besides production-area increases in 1996, many shop owners mentioned
that stress levels also increased in 1996. It’s hard to find qualified
personnel; it’s hard to deal with insurance companies; it’s hard
to please customers … Another major stress causer: being sucked
into the insurance-company negotiation process. While shops have
a duty to provide consumers advice concerning the repair options
available under their insurance policies, there’s a big difference
– as many shop owners pointed out – between offering an expert
opinion on repairs and negotiating on behalf of insurers or consumers.

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